Local market provides far-reaching savings

South Florida Regional Coalition covers a small geography but manages to reap ample savings through supply aggregation, standardization and marketplace leveraging.

When South Florida Regional Coalition (SFRC) formed in 2006, it did so to create an environment for better contract pricing. In doing so, the 13-member group has learned how to aggregate and leverage the local supplier market place. Today, SFRC is focused on growing its membership and increasing its buying power within a tight geographic area.

In an interview with The Journal of Healthcare Contracting, Hugo Del Gesso, Jr., vice president, supply chain management, Memorial Healthcare System (Hollywood, Fla.) discusses SFRC’s recent success and plans for the future.

The Journal of Healthcare Contracting: Have you found the coalition is providing members with more advantages than originally expected?

Hugo Del Gesso, Jr.: Absolutely. We are all benefiting from numerous advantages as members. The primary advantages are supply aggregation, standardization and leveraging the local marketplace. A key element to this has been the assistance from Premier in obtaining resources with analyzing potential cost reduction opportunities.

JHC: What are the top three initiatives your regional purchasing coalition has pursued in the last 12 months?

Del Gesso, Jr.: The top initiatives the coalition has pursued include infusion pumps, office supplies, construction-related material and freight.

JHC: How much in savings has your regional purchasing coalition realized in the last 12 months?

Del Gesso, Jr.: Last fiscal year [we realized] a savings/cost avoidance of over $31 million.

JHC: How has being part of a regional purchasing coalition enabled members to leverage their buying power? Is this something your members have become better and smarter at over time?

Del Gesso, Jr.: Through SFRC we have seen tremendous buying power within a tight geographic area. There is no doubt that SFRC members have utilized their experiences to make more informed purchasing decisions.

JHC: How much savings did the coalition achieve in the first year, and how has that increased since?

Del Gesso, Jr.: The first year, our savings was $2 million, and we have doubled savings [annually] in subsequent years.

JHC: How often do your supply chain executives meet, and how do they arrive at purchasing decisions? Is there a full-time staff dedicated to the regional purchasing coalition?

Del Gesso, Jr.: We have two full-time contract managers dedicated to the SFRC. We maintain a steering committee comprised of supply chain executives and two sub-committees (clinical and construction/facilities) that meet once a month. These sub-committees have working meetings to review and choose specific commodity categories, along with capital forecasting.

JHC: How do you co-exist with your GPO? For instance, does the purchasing coalition only work off of the GPO’s contracts?

Del Gesso, Jr.: We work with targeted Premier contracts in an effort to maximize volume, savings and administrative fees. There are some select occasions where Premier contracting does not exist, and those are reviewed for potential cost savings opportunities.

JHC: How do you ensure that the interests of each of your facilities are considered and that each facility’s needs are met?

Del Gesso, Jr.: The clinical and construction/facilities sub-committees convene monthly to analyze specific business opportunities as they relate to supplies. [At each] meeting, select vendors are invited to provide aggregation savings based on their current book of business or market share movement. In attendance are Premier representatives who assist with data gathering and analysis. Communication and coordination are key. Premier representatives meet with each member on a weekly basis with the goal of achieving a collective understanding of the status of each of the SFRC’s initiatives.

JHC: How difficult is it to get buy-in from each of your facilities’ physicians and staff when it comes to purchasing off the coalition’s contracts?

Del Gesso, Jr.: After each sub-committee meeting, consensus is reached on the ability of each member to participate [in] the business offering presented. When appropriate, we look to our clinical subcommittee (comprised of clinicians) to be the conduit for decision-making with physician preference items.

JHC: What have been the greatest rewards you have reaped, individually and as a coalition?

Del Gesso, Jr.: Our greatest reward has been the ability to optimize cost savings through collaboration and by utilizing both owner membership and Premier‘s understanding of the marketplace for improved contract pricing.

JHC: If you could change one thing about the way your purchasing coalition works, what would that be?

Del Gesso, Jr.: We are certainly interested in expanding the number of participating hospitals for the purposes of leveraging more volume to achieve better pricing. Secondly, it is reasonable to say we need to continue to reduce cycle times for quicker results.

JHC: How do you envision your purchasing coalition in five or so years?
Del Gesso, Jr.: Healthcare reform and legislation will lead to more standardization of products. Therefore, focusing on clinical outcomes and evidence-based purchasing will take center stage as we continue to evolve.

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